Gulf States put brakes on joint-GCC railway plan

Gulf States put brakes on joint-GCC railway plan
A freeze on a pan-Gulf rail network is one sign that GCC states are dropping collaborative infrastructure projects for independent economic policies, as low oil prices continue to bite.
5 min read
04 May, 2016
Saudi Arabia is looking to develop its domestic rail infrastructure [AFP]

It was one of the most ambitious plans of the GCC, linking member states – from Kuwait to Oman – on one integrated rail network, ushering in free movement for Gulf nationals.

Now, Oman has said that it has put a freeze on construction of its links to the multi-billion dollar pan-Gulf rail network.

Other Gulf members have announced delays or made little progress on developing their lines which were set to link all GCC states through one network.

"The ministry of transport and communications has not cancelled the project, only delayed it as other Gulf countries have decided to stop work on the project," Mohammed al-Shuaili, ministry of transport and communications, told Times of Oman on Tuesday.

Muscat's decision comes months after the UAE announced a suspension of part two of its rail project, which would link existing lines to its neighbours.

The first phase has been completed which passes through Abu Dhabi and Dubai ports to the rest of the emirates.

It is clear that the problems with the price of oil and minerals is affecting the project
- Ahmed al-Futaisi, Oman's minister of transport

Oman's freeze was touted in February, but it appears it could still develop local rail links, with signs that Gulf States are going solo on the pan-GCC project.

Kuwait city to Muscat

A pan-GCC rail network has been touted for many years, but then in 2011 things started to gather pace when a Gulf railway authority was established and construction on the lines began.

The idea of unhindered travel from Kuwait to south Oman was appealing to many Gulf subjects.

Freight movement would strengthen intra-GCC trade and make the Gulf more logistically intertwined.

However, the GCC is not the European Union and the project has been dogged by inaction and conflicting interests.

Among the concerns are visa issues, illegal migration, smuggling, competing economic agendas, and disagreements about where the lines should meet.

Some Gulf States have made plans that didn't confirm with their neighbours'.

"There was a challenge among countries in the pace at which the project was being implemented. Some countries started, but some others did not follow the design. So this was a challenge for Oman," said Oman's Minister of Transport Ahmed al-Futaisi in March.

"Even if Oman finishes its part, it cannot connect because other countries have not started their work."

[Click to enlarge]

Economic woes

However, these hugely costly plans were drawn up during an era of high oil prices. Now prices have slumped and government cuts are being made, there is less appetite for such grandiose projects.

"It is clear that the problems with the price of oil and minerals is affecting the project," said David Briginshaw, editor-in-chief for International Railway Journal.

"Low oil prices affect investment, and obviously [Oman's] project is designed to take minerals to the coast, so if there isn't demand it brings the whole project into question."

Oman have been looking to mine a wealth of untapped minerals as part of their diversification plans. This is along with more ambitious plans to become a new hub for sea trade to the Arabian Peninsula.

That is one reason why Oman has been keen to see the project develop, but also at play is the sultanate's renewed quest for unity and stability in the region (as we have seen with the Iran nuclear deal). 

Muscat also understands it urgently needs to wean itself off its oil dependency which along with gas accounts for 85 percent of the government's revenues.

"Oman seeks to benefit from its geographical location and key to that is a [land-based] transportation network that connects to Saudi Arabia and the Emirates," said Sigurd Neubauer, non-resident fellow at the Arab Gulf States Institute in Washington.

I think it's a trend that GCC countries are becoming more introspective and looking after their own problems
- Sigurd Neubauer, non-resident fellow at the Arab Gulf States Institute in Washington

"It is looking to be a gateway for the Gulf to international markets so there's really a desire to improve public infrastructure."

Domestic boost

Gulf States now appear to be developing domestic rail projects and city metro systems alone.

Oman Rail was unable to be contacted, but they also look to be pressing ahead with a domestic Fahud-Duqm railway line. The central Oman desert plain, which would be linked with this line, is sparsely populated but holds huge mineral resources.

Meanwhile, Saudi Arabia's 15-year economic plan – Vision 2030 – is another sign that Riyadh is taking an independent path on developing its economy. There's also less evidence it is collaborating with its neighbours.

[Click to enlarge]

"With the slump in oil prices – and Saudi Arabia looking more internally to see how it can transform into creating a post-oil economy – all of these pan-GCC initiatives seem to be on the backburner. I think it's a trend that GCC countries are becoming more introspective and looking after their own problems."

Essentially, Gulf countries are now concentrating on developing domestic infrastructure, and the plethora of competing new international airports in the Gulf – each claiming to be a new regional "hub" – is one example of a lack of cohesion on pan-GCC logistics issues.

"There's much more independently-minded policies from Gulf states… there are so many variables at play right now which means further GCC economic integration is not where we are."

Ultimately, Oman, Saudi Arabia and other GCC countries are pursuing independent economic policies they think will get them out of a low-oil price financial funk.

Meanwhile, political differences between some GCC states still remain.

Domestic opposition to spending cuts and subsidy reforms have sparked anger. It makes the quest for economic stability and job creation a more urgent task for countries such as Oman and Saudi Arabia.

"Oman's immediate priorities are to expand tourism, and find other ways of increasing government revenues," said the academic. 

"But these kind of infrastructure projects take decades to develop and their effects are not immediately felt. I am sure the Gulf rail project is only a postponement."

As it stands, the delay seems open ended, and work is only likely to resume when oil prices rise sufficiently, although nobody has an idea when this might be.